The IRS has recently updated the standard mileage rates for 2022, and there are a few changes you should be aware of. If you’re using your vehicle for business, or if you’re an active-duty member of the Armed Forces moving for medical reasons, you’ll see an increase in the rate. However, if you’re driving for a charitable organization, the rate remains the same as last year.
Here’s the breakdown:
- For business use, the rate has gone up to 58.5 cents per mile, a 2.5 cent increase from 2021.
- Active-duty Armed Forces members moving for medical reasons will now get 18 cents per mile, up 2 cents from last year.
- The rate for driving in service of charitable organizations remains at 14 cents per mile, as it’s set by law and hasn’t changed from the 2021 rate.
These new rates are effective from January 1, 2022, and apply to various deductible transportation expenses, mileage allowances or reimbursements paid to a charitable volunteer or a member of the Armed Forces, and transportation expenses incurred by these individuals. They also apply to the maximum fair market value of employer-provided automobiles for which employers may use certain valuation rules.
However, keep in mind that under the Tax Cuts and Jobs Act, you can’t claim a miscellaneous itemized deduction for unreimbursed employee travel expenses or a deduction for moving expenses, unless you’re an active-duty member of the Armed Forces moving under orders to a permanent change of station.
If you’re curious about how these rates are determined, the IRS uses statistical analysis and cost data from the previous year. They consider the cost of owning and operating a vehicle, including gas prices, insurance premiums, maintenance, and other related expenses. The rates for business miles driven and for medical or moving purposes are determined based on these costs, with the business rate taking into account both fixed and variable costs, and the medical/moving rate considering only variable costs. The rate for charitable mileage is set by law and doesn’t change.
When it comes to reimbursing your employees for mileage and vehicle costs, there’s no federal law requiring it, unless not doing so would bring the employee’s net wages below the minimum wage. However, some states do require it, so be sure to check your state’s laws if you have employees who drive for work. Most businesses, regardless of size, do reimburse their employees for mileage, and not doing so could deter potential drivers from applying for job openings. To manage this process effectively, it’s a good idea to have a clear policy in place, communicate it to your drivers when they’re hired, and keep track of relevant data, such as mileage and vehicle costs. You might also consider using an automated solution to track this data.
